What You Need to Know About the CARES Act

What You Need to Know About the CARES Act
USNS Comfort (T-AH-20) moves up the Hudson River past the Statue of Liberty as it arrives in New York on March 30. (Photo by Bryan R. Smith/AFP via Getty Images)

By Lt. Col. Shane Ostrom, USAF (Ret), CFP® and Capt. Paul J. Frost, AFC®, USN (Ret)


By now, most of our readers are aware that Congress passed, and the president signed, the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act to assist individuals, as well as small and large businesses, directly affected by the coronavirus outbreak.


Your MOAA Financial Education Team put together the below summary of key provisions that will most impact the military and veteran community.


Stimulus $$

  • Do not expect any payment(s) prior to mid-April. Processes must be developed.
  • Individuals/Couples must have adjusted gross income (AGI) less than $75,000/$150,000 to receive full payment(s) of $1,200/$2,400.
  • Parents will receive another $500 for each child under 17.
  • Payments will be reduced for AGI above $75,000/$150,000, decreasing to $0 for AGI above $99,000/$198,000.
  • The IRS will use your 2019 tax return if submitted. Otherwise it will use 2018 as a reference. Veterans with only VA tax-free disability compensation and/or those on Social Security also are eligible. The Treasury Department/IRS will work with the VA and Social Security to identify people on those payment programs.
  • Military retired pay & Social Security* (high income earners) count against AGI. (*When SSA benefits are taxable).
  • AGI is defined as an individual's total gross income minus specific deductions. Taxable income is adjusted gross income minus allowances for personal exemptions and itemized deductions. For most individual tax purposes, AGI is more relevant than gross income.


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Tax Filing Extension

  • The federal filing deadline has been extended to July 15.
  • According to the IRS, people who have filed, or plan to file early, can expect to receive a refund if they are owed one.
  • States determine their own tax laws and policies. Check with your state for its income tax deadline.


Retirement Accounts

  • Required Minimum Distribution rules are waived for certain retirement plans in calendar year 2020.
  • Also waived: The 10% early withdrawal penalty on retirement account distributions for taxpayers facing virus-related challenges.
  • Withdrawn amounts are taxable over three years, but taxpayers can recontribute the withdrawn funds into their retirement accounts for three years without affecting retirement account caps.
  • Eligible retirement accounts include individual retirement accounts (IRAs), 401(k)s and other qualified trusts, certain deferred compensation plans, and qualified annuities.


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Unemployment Assistance

  • States will continue to pay unemployment to people who qualify.
  • The act adds $600 per week from the federal government on top of whatever base amount a worker receives from the state. The boosted payment will last four months. Example: An out-of-work person who had been receiving the national average of about $340 per week in unemployment now will receive $940 a week.
  • The legislation also adds 13 weeks of additional unemployment insurance.




Student Loans

  • Employers can provide up to $5,250 in tax-free student loan repayment benefits.
  • Employers can contribute to loan payments, and workers won't have to include that money as income.
  • All loan and interest payments are deferred through Sept. 30 without penalty to the borrower for all federally owned student loans.
  • Students who drop out of school as a result of the coronavirus won't have time away from school deducted from their lifetime limits on subsidized loan and Pell grant eligibility. Those students will not be asked to pay back any grants or other aid they've already received.
  • Note on MOAA Educational Assistance: MOAA is offering a six-month hardship deferment for issues related to COVID-19 (layoff, reduced work hours, unemployment, etc.). Download the form here.


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Health Insurance Coverage

  • The act requires all private insurance plans to cover COVID-19 treatments, including any vaccines and co-pays, and makes all coronavirus tests free.


Currently Serving Members

  • Separate from the CARES Act, DoD started a new pay called Hardship Duty Pay-Restriction of Movement (HDP-ROM).
  • The policy allows services to pay up to an additional $1,500/month for members who are impacted during a PCS move, or those who must acquire temporary lodging that goes beyond the normal 14-day Temporary Lodging Expense (TLE) TLE limit (which is 14 days) because of COVID-19.
  • Each service will implement its own process and pay.